Delaware Vs Nevada LLC: Which Is The Better For Your Firm?

Ever since the state’s reformation as an enterprise promise land, Delaware has been the sweet child of Corporate America for the longest time. With such a level of prosperity, it’s only a matter of time before other states decided to follow suit – Nevada being the closest to replicate that level of success.

But unless you’re in the Fortune 500 category, incorporating an LLC in either of these places will require deeper inspection.

With that being said, let’s find out exactly what each state has to offer before you make that decision.

Delaware LLC and Nevada LLC – Common denominator

Neither Delaware nor Nevada requires opening a bank account or holding business or board meetings within the state.

Moreover, as long as you have a registered agent in the state where your business organization was established, the firm can locate its headquarters wherever.

Both have corporate-friendly court systems that appeal to commercial litigation. Delaware has the Court of Chancery which acts as its largest legal forum for corporate dispute handling. And Nevada’s version of corporate accommodation comes in the form of rulemaking; its 2007 Senate Bill 242 retroactively provides LLC-level asset protection for smaller-scale companies.

These things make the two states stand out as promising lands for business foundations.

What are the differences between Nevada LLC vs Delaware LLC?

Fee and taxes

The minimum filing fee is USD$90 to register an LLC in Delaware. In contrast, you need to pay USD$425 to form a Nevada LLC. The cost in Nevada includes:

• The Initial List (names and titles of managers or managing members)
• Nevada business license
• Filing fee

However, Delaware has a franchise tax that is much more expensive than that of other states, whereas, in Nevada, you don’t need to pay some typical state taxes: unitary tax, estate tax, income tax, gift tax, franchise tax, personal income tax, etc.

Business policy and law

Nevada offers the benefit of foreign entity registration, which enables you to create a Nevada LLC even if you don’t reside there by filing as a foreign entity. However, the state still requires a business license.

Unlike in Nevada, Delaware LLCs do not need a business license if they do not conduct business there.

Delaware uses judges rather than juries to settle commercial legal issues. A judge with knowledge of business law will evaluate your case (not a jury of untrained individuals).

So if you ever find yourself appearing in court or in some major cases, you are more likely to have a fair, unbiased, and quick procedure with experienced judges and counsel.

Privacy (Disclosure)

Regarding privacy, Delaware doesn’t require to provide the list of members and managers in the LLC Certificate of Formation or any later filings.

The state also eliminates the need for Annual Reports, but still requires the name and physical address of the registered agent to be made explicit.

Nevada is also the same as the state does not need any owner or member disclosure. Yet, an initial and yearly list of managing members and managers (names and titles) of an LLC is compulsory.

Bank account

As mentioned before, both these two states don’t force the business owners to open a bank account in the state.

Yet, if you need to do so, Delaware offers more advantages. This is because the U.S. Chamber of Commerce rates Delaware enterprises higher overall.

So, except for the IRS and child/spousal support, your bank account in Delaware is safe from most creditors if you decide to open one. This indicates that your bank account cannot be seized to satisfy a debt or court order.

Delaware vs Nevada corporation

Law protection

Nevada corporations’ liability law differs significantly from Delaware’s, and each of these variations is intended to reduce officers’ and directors’ liability in Nevada (not used for all LLCs).
First, Nevada corporation law has extended liability protection for violations of the duty of care to the officers.

Meanwhile, Delaware corporation law only releases directors from liability for these breaches if a company chooses to remove that liability in their Certificate of Incorporation.

However, corporations in Nevada only require officers and directors to take responsibility for breaching the intentional fraud and duty of loyalty or misconduct.

Additionally, Nevada corporations can have more flexibility than those in Delaware in choosing to indemnify directors and officers from all claims and opt to cover their legal costs. The primary advantage of incorporating in Nevada (compared to Delaware) is this reduced liability.

Value to corporation’s stockholders

According to statistics, the assets of Delaware corporations are placed at a premium to the market value (i.e., priced more than it is truly worth), while Nevada corporation’s assets are not.

Nevada’s legislation is better suited to the interests and preferences of directors and executives, whereas Delaware law is more pro-stockholder. That’s why Delaware often has more corporations’ institutional ownership than Nevada.

Thus, it makes the structure of the board of directors in Nevada different from all types of Delaware corporations. Nevada’s director boards may include a far higher percentage of insiders than those in Delaware.

Which one is better for your business?

From all the information above, we can see that most of the benefits given in Delaware are for big organizations with several shareholders. And small firms enjoy little to no benefits from the corporate-friendly regulations there.

While Delaware’s prominence in enterprise development is still hardly matched by its competitors, incorporating here does come with hefty costs. As such, it’s fitting to say that unless you plan to expand beyond your current size, there’s no real benefit to setting up an entity in this state.

Nevada might be more of a good fit for small to medium-sized companies looking for better business conditions without the hassle.

Conclusion

Although many big companies in Fortune 500 have been incorporated in Delaware rather than Nevada, you should consider the pros and cons in the first place. And this article has provided you with the main differences between Delaware LLC and Nevada LLC.

Depending on your goals, business structure, and budget, you might choose a more suitable one to fit the future vision. Keep in mind to take in-depth research in all aspects to reduce the risks.